Monday, June 10, 2013

97. Proximate and ultimate goals

 Economists assume that people and firms go, and should go, for maximum utility or profit. But they don’t tell you how to achieve such goals.

As I argued in the previous item of this blog, in human affairs it is useful to see causality as multiple, as proposed by Aristotle. And then goal achievement depends on several causes, which are all uncertain. The efficient cause (that which acts) of labour, people at work, is difficult to predict and to manage, especially in the growing segment of professional work. The formal cause (how things are done) of technology changes due to innovation. The final cause (for what purpose people act) varies and may be multiple. The conditional cause (circumstances that affect the other causes) of markets and institutions operates in a complex system of strategic interaction, herd behaviour, fads and fashions, and a political process of bumper cars in a fancy fair, which yields unforeseeable and partly unintended effects.

What is much more reasonable and feasible than trying to go directly for the ultimate outcome is to try to influence the different causal factors as more proximate goals, in directions that are likely to contribute to ultimate goals, but without certainty. Those proximate goals may also be seen as having value in and by themselves, as different dimensions of virtue and merit, again according to Aristotelian philosophy.

In life this is what people in fact do. How do you achieve happiness? By developing the factors that contribute to it and have value by themselves. Build and maintain friendships. Be good to loved ones. Develop empathy. Build an education that you enjoy. Enjoy art so that it may develop your sense and sensibility.

In economies, select appropriate actors, motivate them, provide knowledge and technology, and provide proper conditions.

Firms should aim to motivate labour, not merely as a means but also as an intrinsic value. It is well known that intrinsic motivation is often more powerful than only the extrinsic motivation of salary and bonus. People are motivated by self-interest, yes, but also by the will to make a contribution to something significant. People want to be autonomous, yes, but they also want to be part of a social entity and process.

Aim to develop knowledge as a value in itself, and as contributing to technology. The more fundamental research is the more uncertain its outcome. Planning innovation on the condition of predictable contribution to profit is self-defeating since it will yield only marginal improvement on what already exists.  If fundamental innovation is too risky to go it alone, do it in collaboration with others to spread the risk.

Aim to make a contribution to the natural, social, cultural and economic environment that constitutes the conditions of success.

Create room for variety of ideas, internally, within an organization, and externally, in relations with suppliers and customers. Create a culture where failures are recognized and admitted, punished by blame only in case of misconduct. Organize opposition, to benefit from variety of ideas and experience. I refer here to earlier items (57, 58) in this blog, on cognitive distance.       

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